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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Mark Bartlett who wrote (5381)	1/7/1998 8:57:00 PM
From: Thomas F. O'Connor	Respond to of 116752

I agree that the strength of the Dollar is an impediment to a higher gold price and one of the reasons could be the following: It is deemed imperitive to keep the Dollar price of gold at a stable low or slowly falling level because if it is allowed to rise there will not only be a rise in the price of gold in the local currencies because of their devaluation but also a additional arithmetic rise due to the Dollar increase in the gold price. Let me give a quantitative example. The dollar price of gold was $320 per ounce in July 1997 and the Japanese Yen was 115 to the Dollar Thus, the Yen price of an ounce of gold was 36,800 Yen. Today, the Dollar price of gold closed at 283.75 and the Yen was 132 (+/-) to the Dollar. So, the Yen price of a ounce of gold today is 37,455. However, if the price of gold was still $320 per ounce, the Yen price of an ounce of gold would be 42,240 Yen. So, instead of a 1.8% increase, there would have been a 14.7% increase in the gold price per ounce in Japanese Yen. Of course, in some currencies, especially those of other East Asian currencies, the effect would not be as significant because the size of their devaluation overwhelms the reduction in the gold price. But the drop in the gold price has tempered the possible price rise of gold of most major currencies, depending on the amount of their depreciation against the Dollar.